Leaving Money on the Table

Players leave money on the table every year. It’s true! Pitchers, in particular, have been signing away free agency years at below-market prices for a while now.

Consider the most recent big signing, Yu Darvish. He most likely would have made more money had he stayed in Japan for three years and come over as a free agent. Through the arbitration process in Japan, he was due around $27 million over the next three years, and his deal with the Rangers only pays him $25 million over the same time frame. Had he continued his dominance, and come over in three years, it seems likely he would have made more than $30 million over three years. He would have had the leverage of the unrestricted free agent.

But Darvish’ plight resembled that of the arbitration-eligible pitcher here in the states. He could only talk to one team, which should sound familiar. And he probably valued some non-monetary benefits that a long-term contract offered: security and the ability to compete against the best in the world. How prevalent is this sort of give-and-take in the normal process here in the states? How many pitchers have given up free agent years at below the going rate?

More than you might think. Below is a listing of all the currently active players that signed deals before they were free agents that will pay them through free agency years. Most of these players are being paid below the going rate for a player of their ilk.

Description Service* $/yr (m) 3yr avg WAR
Justin Verlander FA1 – FA3 4.002 20.1 7.2
Felix Hernandez FA1 – FA3 4.06 20.1 6.2
Jered Weaver FA1 – FA4 5.129 17.7 5.1
John Danks FA1 – FA4 5 15.8 3.1
Matt Cain FA1 4.038 15.3 4.1
Josh Johnson FA1, FA2 4.026 13.75 4.5
Dan Haren FA1, FA2 + option FA3 4.154 13.7 5.6
Zack Greinke FA1, FA2 4.057 13.5 6.4
Trevor Cahill FA1 + club option FA2, FA3 2 12.8 2.4
Clay Buchholz FA1 + club option FA2 3.059 12.5 2.1
Jon Lester FA1 + club option FA2 2.075 12.3 5.3
Ervin Santana FA1 + club option FA2 3.104 12.1 2.9
Gio Gonzalez FA1 + club option FA2 2.162 12 3.3
Brett Anderson club option FA1 2.039 12 2.5
Yovani Gallardo FA1 2.108 11.5 3.5
Fausto Carmona club option FA1, FA2 1.125 11 1.6
Jaime Garcia FA1 + club option FA2, FA3 3.047 10.9 3.4
James Shields club option FA1, FA2 1.125 10.5 3.5
Adam Wainwright FA1, FA2 2.027 10.5 3.9
Joe Blanton FA1, FA2 5.016 10.5 1.5
Ricky Romero FA1 + club option FA2 2 10.3 3.3
Yu Darvish FA1 – FA3 10.3 n/a
Johnny Cueto FA1 3 10 2.3
Carlos Marmol FA1 4.084 9.8 1.5
Matt Moore club option FA1, FA2 0.017 9.5 n/a
Gavin Floyd club option FA1 2.045 9.5 4.1
Scott Baker club option for FA1 2.128 9.25 2.9
Wade Davis club option FA1, FA2 1.032 9 0.9
Brandon Morrow FA1 + club option FA2 4.091 9 2.4
Joakim Soria club option FA1, FA2 2 8.375 1.6
Sergio Santos club option FA1, FA2 2 8.375 1.3
Nick Blackburn club option for FA1 2.017 8 1.3
Jake Peavy FA1 2.101 8 2.4
Ubaldo Jimenez club option FA1 1.087 8 5.3
Ryan Vogelsong FA1 + club option FA2 5.02 5.6 2.4
R.A. Dickey FA1 + club option FA2 5.007 4.6 1.7

Description = description of free agency years bought out; Service* = service time at time of contract signing; $/yr is an average of the free agency portions of the contract.

Seen in this light, the Darvish contract takes on a new hue. Now he’s given up his three free agency years for a price that sits between Joe Blanton and Ricky Romero. It might be unfair to separate out his contract, given the posting fee, but it’s only six and 60 that show up on the player payroll portion of the Rangers’ budget, and this chart can also provide some information from the player’s perspective. Yu might have left money on the table, but not much more than Ricky Romero. That seems about right.

By the crude measure of comparing salary to three-year WAR averages, Zack Greinke might be giving away the most money on his first free agent year. Or it’s Ubaldo Jimenez, who ended up signing a long-term contract a little over a year into his Major League career. That contract gave his team a good deal on that first year of free agency (eight million dollars) in return for six years of security for the player.

Jimenez’ contract does actually point to a trend on this list. Sort the list for the average value of the free agency years, and you’ll notice something about the service time. As Steve Slowinski posited when discussing a possible Derek Holland extension, teams pay more for the free agency years for pitchers that have accrued more service time. That makes sense.

The top eight values on this list were all signed by players that had four or more years of Major League experience when they signed their contract. They signed shorter contracts and had less of a reason to give up money for security — they were only two years away from free agency on average. Perhaps for some of these more seasoned pitchers, the exchange was not security for money, but wins for money — at least in the case of Justin Verlander and Jered Weaver, it seems like they might have traded some average annual value for staying on a competitive team. Still, all of them but John Danks look like below-market deals.

That might be the most impressive fact about this list. It only includes about three guys that have contracts that may be end up being tough on their teams: Fausto Carmona, Joe Blanton, and Wade Davis. Obviously, the Rays are comfortable handing out their cookie-cutter contract to young starters (team options for the final year of arbitration and the first two years of free agency), and it seems like there’s a good reason why. The value they’ll get from Shields and (probably) Moore will pay for many many Wade Davises. Judging from this list, the Jays and Red Sox are implementing a slightly more conservative Rays philosophy — pay for a year of free agency and get one option on the player. Why more teams aren’t doing this is surprising, but not all the teams have young pitchers worth locking up like this.

This isn’t necessarily a recent thing. The Indians locked up their position players to similar contracts in the 90s. C.C. Sabathia, Jeremy Bonderman, Scott Kazmir, Jon Garland, Doug Davis, Ben Sheets and even Brandon Webb gave away free agency years when they signed long-term contract in their arbitration years.

This also isn’t necessarily a bad move for the player. Chien-Ming Wang and Jeff Niemann had opportunities to sign similar contracts, went year-to-year, and probably lost money because of it.

Perhaps what this phenomenon mostly represents is that we shouldn’t be too quick to denigrate long-term contracts that lock up the player through a few below-market years. Not only is it more common than we might think but there are also lessons from the past that teach us how quickly a pitcher’s career can fall apart. If you were less than a quarter of the a year into your first season in the league, and your team offered you a five-year deal worth $14 million, and oh, hey they’ll need a few option years tacked on the end in order to make it worthwhile for them — would you say no?

With a phone full of pictures of pitchers' fingers, strange beers, and his two toddler sons, Eno Sarris can be found at the ballpark or a brewery most days. Read him here, writing about the A's or Giants at The Athletic, or about beer at October. Follow him on Twitter @enosarris if you can handle the sandwiches and inanity.

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To summarize: young pitchers who might get hurt often sign contracts that reveal an appropriate level of risk-aversion.